Downside Tasuki Gap

The downside tasuki gap candlestick pattern occurs in a strong downward moving market and is considered to be a rare formation. It is similar to the bearish downside gap three methods pattern except that the gap that is made between the first two days is filled by the third day in the downside gap three methods pattern. Also, this pattern occurs less often than the upside tasuki gap candlestick pattern.

In order to qualify as a downside tasuki gap pattern certain conditions must be met. First, as mentioned above, the market is characterized by a downtrend. Second, the color of the first two candles must be the same as the prevailing trend. For this formation this means that there must be two long black candlesticks with a gap between them in the first and second days. Third, a white candlestick occurs and is characterized with an opening within the body of the second day. Last, the candlestick on the third day does not close the gap between the two candles. Furthermore, the last two candles which should be opposite colors are about the same size.

What does the downside tasuki gap pattern indicate is occurring in the markets?
The gaps that occur in the pattern are of significance and this pattern occurs in a market that is in a downtrend. As one gap appears in the middle of the trend but is not able to fill itself the following day, the direction is still in the downtrend. The white candlestick that occurs on the second day partially closes the gap between the first two candles and may be the result of a temporary low buying price that investors take advantage of. This is only temporary however and the trend is expected to continue in the downward direction. When analyzing the downside tasuki gap pattern, if the gap is not filled then the bears maintain control and it is time to go short, however if the gap is filled then the bearish momentum has come to an end.

Confirmation for this pattern is recommended and should occur in the form of a black candlestick, a lower close on the following trading day to ensure that the downward trend will continue, or by a large gap up.

Japanese Candlesticks are the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals, and you have learned how to read stock charts continue to expand your expertise by learning the various secondary Candlestick Patterns . Combine these with your favorite technical analysis indicators, such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or exchange traded funds .

Continue to learn about continuation patterns and read about the on neck line candlestick pattern.